Normally it’s the tech press that ratchets up the drama between companies, emphasizing the heated competition to the point where it might seem NATO and a UN resolution are needed to keep the peace. But today at a corporate event in New York City, Barnes & Noble did much of the blogosphere’s work. The bookseller unveiled its new Nook Tablet, but rather than focus on the sleek 7-inch device’s impressive specs (1GHz CPU, 11.5 hours of battery life, 16GB of memory, 1GB of RAM, all for just $249), CEO William Lynch spent much of his time on stage hurling insult after insult at Amazon, as if he half-hoped the company’s low-cost competitor, the Kindle Fire, would burst into flames before the holiday season.
Lynch had reason to present with such vitriol. B&N and Amazon have been at war over the e-reader market for years battling for market share and hardware sales, and up until now it appears Amazon has been winning. In September, Amazon CEO Jeff Bezos upped the ante with the Kindle Fire, a media-rich tablet selling for e-reader prices; today, Lynch matched his offering with the Nook Tablet, a device that has all the content we’ve come to love the Nook Color for (books, newspapers, magazines) with additional access to movies, TV shows, music, apps, and games. Lynch didn’t waste anytime boasting “why the Nook tablet is clearly the better product” when compared to the Kindle Fire.
According to Lynch, the Nook Tablet has a superior viewing display, whereas the Kindle Fire uses nothing more than a generic, “off-the-shelf” display; the Nook Color is “much lighter” than the Kindle Fire and has “as much as seven times more storage space” (45GB vs. 6GB, with added SD cards); Lynch argues that the Kindle Fire is “a deficient media tablet”; he says its battery life is miles ahead of the Kindle Fire’s, and that it has faster performance with double the RAM; and he adds that B&N’s product is much better designed, whereas the Kindle Fire looks “just like a BlackBerry Playbook.” B&N also attacked Amazon’s “annoying ads,” saying consumers don’t want to have such things on their devices, even at a subsidized cost.
But Lynch wasn’t done there. Another significant competitive advantage that B&N has over Amazon is the company’s free, in-store support, similar to Apple’s Genius Bar. “That matters to a lot of people, and you can get it at 700 B&N stores around the country,” he said. “Where are you going to get in-store support for the Kindle Fire? At Amazon’s headquarters in Seattle?”
Lynch’s passion is certainly impressive, but will it help sell gadgets this holiday season? Sure, the company is boasting better specs and battery life–not to mention launching the company’s largest ever advertising campaign to market the device–but at $249, can the Nook Tablet outsell the $199 Kindle Fire?
It all comes down to something Jeff Bezos spent so much time touting while unveiling the Kindle Fire: content, content, content. His company plans to use the device to sell Amazon’s services–that is, make the Kindle Fire into a digital Sears Catalog that will help the e-seller push movies, TV shows, books, and more–all through Amazon’s own store.
Barnes & Noble’s strategy is decidedly different–and according to Lynch, will provide users with a more open ecosystem and more choice. “Our strategies are very different,” he said. “[The Kindle Fire] is like a vending machine for Amazon’s services. They are trying to lock people into their ecosystem. We’ve chosen to be much more open.”
In that sense, while B&N will sell books and magazines through its own store and newsstand, it has outsourced a significant amount of its business to third parties. That means users can watch movies on Netflix; they can listen to music on Pandora or Rhapsody; and check out TV shows on Hulu Plus. For consumers, no doubt it’s great to have access to such popular apps–services (like Netflix) which you are not likely to see on Amazon, since they are a clear competitor to Amazon’s Prime Instant Video service. But at the same time, it also means in order to watch movies, you’ll need a subscription to Netflix and other content providers, rather than one, all-you-can-eat-subscription to Amazon Prime.
But why would Barnes & Noble outsource such a significant part of its business? Traditionally, the retailer has been a content seller. At the company’s hundreds of stores, they sell books, magazines, DVDs, music on CDs, and so forth. As the world has transitioned to the digital space, companies have transitioned too, meaning they’re now selling e-books and MP3s and streaming movies. In this case, however, Barnes & Noble has decided to stop at selling more than books, newspapers, and magazines; it’s now giving the other part of its media business–movies, music, and so on–to third parties such as Netflix, Hulu, and Pandora. Isn’t that a significant part of business that B&N is now sacrificing? After all, Amazon and Google sells movies and music; so does Apple, which offers tons of content through iTunes, while still giving access to third parties such as Amazon, Netflix, and more.
When I asked Lynch this at the event, he said, essentially, that it simply wasn’t the company’s strategy. He said that the company already makes many billions of dollars from selling books and other traditionally print content. But doesn’t that mean he’s also giving up on many billions of dollars by not selling movies and music? My question is then: Why be so benevolent to other services? If his answer surrounds offering a better consumer experience, wouldn’t consumers prefer to have all-encompassing solutions like those from Amazon and Apple, which offer all content through one convenient store? (On the Nook Tablet, you’ll have to buy music from another store and then side-load it to the device–not exactly a streamlined process.)
These questions might not matter to consumers this holiday season, but they’re likely to matter to shareholders and the company’s bottom line at some point in the future.